In a shocking turn of events, PCs are now outselling tablets. Last year it was the opposite. What’s going on?
Priorities, that’s all. It’s the cycle of events in electronics. It’s happened before and it’s going to happen again as the market matures.Yes, I see a parallel from 30 years ago. In the 1980s, home computers and video game systems took turns being the new hotness. Atari game systems took the nation by storm, then went out with a whimper as the Commodore 64 and VIC-20 overtook them in sales. Then along came Nintendo, and by 1987 Commodore magazines were lamenting that Nintendo game consoles were outselling Commodore computers (and, indeed, Nintendo’s game system was outselling home computers as a whole). By the late 1980s, having both a home computer and a game system became normal, and people would upgrade each as they needed, and eventually the media stopped predicting the impending death of the video game market and the impending death of the home computer market.
Until tablets came along, that is. And then tablets were going to destroy both, because tablets were more portable and could be used both for casual computer use and casual gaming.
But now most people who want a tablet have at least one–no surprise, seeing as a perfectly good 7-inch tablet costs $99–and sales are faltering.
PC sales are up, meanwhile, because businesses are finally replacing their Windows XP PCs with machines running Windows 7. And Best Buy reports PC sales to consumers are much higher than they expected, likely because many consumers still have nasty old PCs they’ve been putting off upgrading for years.
So what else are consumers buying? Video game systems. It’s no coincidence that both Sony and Microsoft released new game systems late last year and Nintendo released one in late 2013. Sony has sold about 7 million PS4s, Nintendo has sold about 6 million Wii Us and Microsoft has sold about 5 million Xbox Ones. That’s $7.2 billion that consumers didn’t spend on tablets, and that’s in spite of the Wii U selling in smaller numbers than anyone expected.
A family making less than $85,000 a year will struggle to make a $500 purchase without going into debt if they’re being good consumers and making a house payment, a couple of car payments, subscribing to cable and Internet, eat out once a week, have a family smartphone plan, and go on vacation once a year. That means they’re probably not going to buy all three in a single year, or even two of the three. And they may very well put off replacing one for an extra year if it means they can have one of the others.
And guess what? Average family income is $52,000 a year.
So it’s pretty clear to me what’s going on. There isn’t enough room in most budgets for PCs, game systems, and high-end tablets to all have a good sales year at the same time, so at least one is going to be disappointing, if not two.